Recession concern dampens European investor sentiment – Fitch

An increasing number of investors expect fundamental credit conditions will deteriorate across sectors, according to a Fitch Ratings investor survey.

The more circumspect sentiment was most notable for the sovereign segment, where the proportion of survey respondents anticipating worsening conditions more than doubled to 55%, from 24% in the last survey.

The gloomier outlook appears to reflect rising recession fears and low inflation expectations.

Nevertheless, the insatiable hunger for high yield continues, stoked by continued ultra-easy monetary policy. Some 27% of respondents voted HY their most favoured investment choice, down from 29% in the last quarter, but still clearly ahead of runners-up emerging market corporates and banks.

Investors expect the appetite for yield to be met by willing issuers in the HY and EM corporate segments; the only sectors which a majority of investors believe will see increasing issuance in the next 12 months. The HY issuance boom has been supported by historically low default rates.

Fitch conducted the Q213 survey between 3 April and 7 May. It represents the views of managers of an estimated €8.6trn of fixed-income assets. The full survey report is available at www.fitchratings.com or by clicking the link above.

A video summary is also available at http://www.fitchratings.com/web_content/marcom/multimedia/oxvideo.jsp?video_type=video&id=2400747305001

 

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